Decentralized finance (DeFi) stablecoin issuer Usual recently announced a significant update to its USD0++ protocol, introducing dual exit mechanisms aimed at enhancing the token’s long-term sustainability. These changes are part of a broader strategy to align the staked stablecoin with its vision of transforming USD0++ into a bond-like financial instrument supported by real-world revenue streams.
However, the announcement caused immediate market disruption, with USD0++ plummeting to as low as $0.89 before eventually stabilizing around $0.92, which is 8% below its $1 peg. The introduction of the dual exit system has left users scrambling to adapt to the new redemption options, as they now face a conditional or unconditional exit and sudden changes to the official documentation regarding the staked stablecoin’s floor price.
Stani Kulechov, the founder of Aave, commented on this development, stating that it serves as another example of the potential pitfalls of fully hardcoded and immutable price feeds.
The dual exit mechanism, introduced on January 9, offers users two options. The first is a “conditional exit,” which allows for a 1:1 redemption at the $1 peg but requires users to forfeit a portion of their accrued rewards, effectively penalizing early withdrawals. The second option is an “unconditional exit,” which offers an immediate cash-out at a floor price currently set at $0.87 but will gradually rise to $1 over four years.
This change in direction by the DeFi stablecoin issuer was accompanied by an alteration of the protocol’s official documentation, which was described by one user as “fraud.” Despite community concerns, Usual has not responded to requests for comment from Cointelegraph.
The updated four-year vision and changes to redemption mechanisms triggered a market fallout, resulting in severe volatility. The new floor price of $0.87, down from $0.9995 according to one user, caused liquidity providers on platforms like Curve Finance and Pendle to experience sudden shifts, potentially leading to hundreds of millions of USD0++ leaving DeFi and potentially sparking multimillion-dollar liquidations. According to the announcement, Usual’s decentralized autonomous organization will cover any potential bad debt in non-migrable markets up to the current amount.
USD0++ is the staked version of USD0, a stablecoin designed for stability and liquidity, fully backed by real-world assets such as US Treasury bills. Its primary purpose is to serve as a collateralized, dollar-pegged token. The staked version, USD0++, functions as a bond-like financial instrument where users lock USD0 into USD0++, earning interest (yield) through emissions of the protocol’s native token, USUAL. However, USD0++ comes with the trade-off of a four-year lock-up period that may fluctuate based on redemption mechanisms and is not immediately accessible without incurring penalties.